Feature Article
Enel SpA: Low Debt, Robust Renewables and a Nuclear Play
By
Roger S. Conrad on
Jul. 8, 2024
Italy closed the last of its operating nuclear reactors in 1990, following a 1987 post-Chernobyl referendum. But earlier this year, Enel SpA (Italy: ENEL, OTC: ENLAY) and Ansaldo Nucleare forged an agreement to develop new nuclear reactors, with support of the country’s Ministry of Environment and Energy Security.
Enel’s Endesa unit operates several reactors in Spain, which at this point has a plan to phase out nuclear energy by 2035. But like Italy, the country is now reconsidering its options. And as the largest power producer in both countries, the company is poised to capture what business emerges.
Entergy Corp: Conservative and Cashing in on Nuclear’s AI Connection
By
Roger S. Conrad on
Jul. 8, 2024
Conservative Holding Entergy Corp (NYSE: ETR) has been a fully regulated utility for more than two years—divesting its Palisades nuclear plant in Michigan in June 2022 to Holtec International.
The result is reduced business risk, a stronger balance sheet and exclusive management focus on growing regulated rate base in the utility’s four-state territory. Annual industrial load growth is the strongest in America averaging 8-9 percent annually. And it’s likely to accelerate the next few years, spurred by “onshoring” to the US Gulf Coast, electrification, artificial intelligence-enhanced data centers (5-10 gigawatts demand projected) and rapid growth of LNG export infrastructure.
A Solid First Half but Better Ahead
By
Roger S. Conrad on
Jul. 8, 2024
Utility stocks had their moments in first half 2024. But with the Federal Reserve sticking to a “higher for longer” interest rate policy, it’s little surprise the Dow Jones Utility Average finished the first six months of the year well behind broader stock market averages, lagging the S&P 500 by 12.5 percentage points.
Boosted mainly by strong performance of four stocks—Constellation Energy (NYSE: CEG), MDU Resources (NYSE: MDU), NextEra Energy (NYSE: NEE) and Vistra Corp (NYSE: VST)—the Conrad’s Utility Investor model portfolios did somewhat better.
Why NextEra Energy Partners Won’t Cut
By
Roger S. Conrad on
Jul. 8, 2024
Most companies view dividend cuts only as a last resort. That’s for good reason.
Investors rightly view slashing payouts as management breaking faith, even when there are very good reasons. Just ask Kinder Morgan Inc (NYSE: KMI) founder and largest shareholder Richard Kinder. His stock sells for half what it did in late 2015 before the midstream company cut dividends by 75 percent, despite a 130 percent increase since.
Picks and Pans for Second Half 2024
By
Roger S. Conrad on
Jul. 8, 2024
Nuclear power has officially joined cutting debt, M&A and artificial intelligence as primary drivers of utility and essential services stock returns in 2024. In contrast, high debt and renewable energy have remained broadly unpopular as themes in the first half of the year, as they were in 2023.
As my table “Best and Worst of 2024” highlights, divergence between individual company performance in the Conrad’s Utility Investor coverage universe remains quite wide. The best first half performer by far was Vistra Energy (NYSE: VST) with a 124.34 percent total return. The worst was FuelCell Energy (NSDQ: FCEL), where survival-motivated share dilution resulted in a -60.08 percent loss.
Exelon Corp: Undervalued, Steady Growth, Low Risk
By
Roger S. Conrad on
Jun. 10, 2024
Conservative Holding Exelon Corp (NYSE: EXC) spun out its unregulated nuclear power operations to shareholders as Constellation Energy (NYSE: CEG) in early 2022. And it’s fair to say no one—including me—anticipated the stock would rise nearly 400 percent since.
Neither did I think the remaining six-state regulated utility would return basically zero. And despite boosting dividends 13 percent since the spin, Exelon shares trade at just 14.6 times expected next 12 months earnings, versus 16.6 for the Dow Jones Utility Average.
MDU Resources: One Last Spin, Then a Potential Takeover
By
Roger S. Conrad on
Jun. 10, 2024
Last year, Aggressive Holding MDU Resources (NYSE: MDU) spun off its construction materials unit as Knife River (NYSE: KNF). Since then, the shares of KNF that MDU investors received per a 1-for-4 ratio have appreciated by roughly 75 percent.
Now MDU is spinning out its larger construction services business as Everus, in a deal expected “in late 2024.” The unit reported all-time record order backlog in Q1. And with growth opportunities including data center development and industrial reshoring, its launch promises to attract even more interest.
Lower Prices for High Quality Stocks Mean Better Buys
By
Roger S. Conrad on
Jun. 10, 2024
All Utility Report Card companies have released calendar Q1 results and updated guidance, save a pair of floundering renewable energy companies flirting with bankruptcy: FuelCell Energy (NSDQ: FCEL) and SunPower (NSDQ: SPWR).
For Portfolio companies, the verdict from later reporters’ results is the same as from the early returns. Number one, all of our companies are on track with the investment plans behind long-term earnings and dividend growth guidance.
More Telecom Cuts
By
Roger S. Conrad on
Jun. 10, 2024
Only three US communications companies have avoided dividend cuts since 1996 Deregulation: Giants Comcast Corp (NSDQ: CMCSA) and Verizon Communications (NYSE: VZ), and specialty fiber broadband service provider Cogent Communications Holdings (NSDQ: CCOI).
Last month, small town-focused Telephone & Data Systems (NYSE: TDS) slashed its quarterly dividend from 19 cents to just 4 cents per share. The -79 percent cut reflects the proposed sale of wireless operations and related spectrum by the company’s 72.66 percent-owned US Cellular Corp (NYSE: USM) unit to T-Mobile US (NSDQ: TMUS).
Two Ways to Play the Return of Utility M&A
By
Roger S. Conrad on
Jun. 10, 2024
No merger between operating utilities has ever failed to create a stronger, more resilient company. That’s a claim no other sector can make.
Providing electricity, heat, communications and water service is a scale business. Larger companies spread out costs over a wider population and raise vast sums of capital more easily. And they’re better able to handle the inevitable handle shocks to the system, be they natural or man-made disasters.
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Aggressive Income Portfolio
Roger's favorite utilities for investors seeking superior price appreciation by taking calculated risks.
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Top 10 DRIPs
Nothing compounds wealth like reinvesting a rising stream of dividends.
Endangered Dividends List
Warning: Falling Dividends.
Utility Report Card
Roger's current take and vital statistics on more than 200 essential-services stocks.
Conrad's Utility Investor
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